The Two Plagues of Capitalism

The coronavirus pandemic could have disastrous consequences, recounting the millions of deaths from the 1918 Spanish flu. But the threat doesn’t stop there. A new global recession is beginning that may be the same or even worse than that of 2007-2009. It may evolve into a depression like the one that occurred in 1929. A pandemic rarely seen in history, a brutal world recession. Two plagues caused by capital, that is, “modern” capitalism, which brings death and misery in gigantic dimensions.

By: Eduardo de Almeida Neto and Jose Welmowicki

The pandemic will show its true face: the genocide of the poor

From China, the pandemic spread around the world, affecting first the major imperialist countries. Europe and the United States, the most powerful imperialist centers, are now epicenters of the disease, they are semi-paralyzed. In these countries, the pandemic already shows the government’s class character. Even where there is social isolation, factory workers are forced to work, like slaves of that time. In the United States, with thirty million people without any health plan, a 17-year-old teenager died because he was not treated or admitted to a hospital, due to not having medical insurance. Now, the coronavirus is coming with full force to semi-colonial countries. In a few weeks it will be devastating the poor neighborhoods of all of Latin America, Asia and Africa.

The pandemic is taking on its true face, of genocide of the workers and poor people all over the world, from imperialist countries to semi-colonial ones. Along with that, world recession will cause huge unemployment in those places of misery. The signs of barbarism against the workers will increase. Never has the dilemma of socialism or barbarism been so explicit.

The world is stopping…

In December 2019, the first case of Covid-19 was detected in Wuhan, China. The high degree of economic internationalization led to this becoming a pandemic, affecting all countries in the world within three months.

The epidemic brought a large part of China to a standstill, with heavy consequences on its economy.

The Chinese government was always accused of economic data manipulation. Now it had to divulge very heavy data, with a 13.5% drop in industrial production in January-February, a 24.5% drop in fixed capital investment, a 17% drop in exports and 4% in imports.

Then, there was a break in the global production chain of which China is an important part. Factories all over the world felt the lack of parts. Jaguar/Land Rover even reported that it had to transport parts in suitcases to try to maintain production.

Now, with the pandemic evolution, a partial paralysis of the economy is occurring in many key countries around the world.

Possibly, at this moment, between 30 and 40% of the world’s population is confined, something unprecedented in history.

The Emperor’s new clothes

World capitalism was shaken by a virus. There’s an explanation for that.

For decades, neoliberal and austerity plans have severely degraded the living conditions of workers around the world. Labor conditions were made precarious, leading to a large proportion of workers having to work every day in order to be able to eat the next day.

Megalopolis were created with gigantic peripheries of poor neighborhoods, with houses in terrible hygienic conditions, many without water or sewage. Public health was destroyed by budget cuts and privatization.

It is on this decades-long social reality that one of the greatest pandemics in history, is now being waged.

To make matters worse, governments reacted late and wrongly to the pandemic.

The Chinese dictatorship first ignored the coronavirus. Li Wenliang, the 32-year-old doctor who first reported the epidemic, was forced to sign a letter in which he “admitted” to making “false comments that severely disrupted the social order”. A month later, he died from coronavirus.

When deaths were in the hundreds, the Chinese dictatorship realized it couldn’t hide the epidemic anymore. It reacted harshly by isolating Hubei province, where Wuhan is located, so that the result would not be even more catastrophic. It managed to contain the pandemic, at least temporarily. There are great doubts as to whether the Chinese dictatorship is not, once again, hiding evidence of the pandemic spreading to other regions, in order to “return to normal”.

In other countries, social isolation was only partially applied, for the simple reason that the paralysis of companies affects the profits of the bourgeoisie. In the absolute majority of countries, industrial production and social services were also maintained.

The logic of capital understands that the paralysis of activities, necessary to contain the pandemic, affects the “economy”, that is, the profits of the bourgeoisie.

No government, from China to Italy, USA, etc., has taken the position of defending the lives of the workers. At most, some partial and temporary crumbs. As in the Titanic’s shipwreck, rafts are only for the rich.

Capitalism kills through the coronavirus. The pandemic shows, with the harshness of deaths, the social origin of the disease. As in the children’s fable, The Emperor is naked.

Health as a commodity

In the 21st century, humanity has no defense against a virus. There’s an explanation for that. In capitalism, health is considered a commodity. It is invested for profit.

Why isn’t there a vaccine for a common ailment like the flu? Because cough, cold and fever remedies yield billions and billions of dollars every year for big pharmaceutical companies. There is no interest for investing in the production of a vaccine for the different types of flu viruses, which change every year. Not because it is impossible, but because treating the symptoms is more profitable.

There was no interest in producing a vaccine against the coronavirus, even after the SARS and MERS epidemics of 2002 and 2012 (other types of coronavirus), because imperialist countries were little affected.

Now, with the chaos in place, research is being done on vaccines, which should be ready within a year, probably after the end of the pandemic.

Collapsing World Economy

What are the repercussions of this catastrophe on the economy? A hard fall. The International Institute of Finance forecasts a 10% drop in the U.S. economy for the first half of the year, and 18% in Europe. Goldman Sachs Bank forecasts a 24% fall in the U.S. GDP in the next quarter. Morgan Stanley Bank forecasts a 30.1% fall in the same period in the U.S., China should have a heavy economic fall in the first quarter, for the first time since 1976.

Michael Roberts’ 2020 forecast is for a drop in production in the major imperialist and emerging countries, of 15% or more. That’s much higher than the 6% drop in 2008. According to Deutsche Bank, the fall in world economy in this first half of the year will be the worst since the 1929 depression.

To make things worse, in addition to the pandemic, there is an association with the sharp fall in oil prices, due to the dispute between OPEC and Russia, opening up a crisis in oil producing countries.

The stock markets plunge was very hard. On Wall Street the Dow Jones index fell 23% since the beginning of the year. In other European countries, the fall reached 30%.

There is a withdrawal of capital from many emerging countries, leading to a sharp fall in their currencies. Brazil has had the largest capital flight in history, since the beginning of the year.

The IMF has just released the forecast that the pandemic “will cause a global recession this year, which may be as bad as the global financial crisis or worse”. In other words, the IMF also predicts a global recession equal to or worse than that of 2007-2009.

But the various institutes of the bourgeoisie foresee a rapid recovery of the economy. Some speak of recovery already in the second half of the year, others for 2021. Could that be true?

The downward curve of world economy

The ups and downs in the economy, brought about by the pandemic, did not come down on a rising economy. Quite the contrary.

The capitalist economy evolves through cycles, with ups and downs and crises. These short cycles, between 5 and 7 years, have their periods determined by profit rate evolution. We can say, in a simplified way, that when there is an important fall in the rate of profit, the bourgeoisie stops investing, resulting in a crisis. When the recession has already destroyed an important part of the productive forces, the conditions for raising the rate of profit are restored. The bourgeoisie then invests again and the economy raises.

This system, in its structure, has no concern for the needs of the population. It produces what gives profit to the capitalists. Crises are necessary and “normal” parts of capitalism.

In addition to these short cycles, there are also the longer periods of the economy that incorporate several short cycles. Trotsky called these “capitalist development curves”. In those long periods of ascent, growth intervals are greater than those of crisis. In long periods of descent, crises are greater, and growth is anemic. These long curves have no predetermined duration, generally lasting 30 to 50 years. They are determined by extra-economic factors related to class struggle (revolutions, wars), expansion (obtaining new territories), or technological evolution.

The great curve that we are experiencing had an ascending period that was known as “economic globalization”, in the 1980s and 1990s of the 20th century. That moment was marked by capitalist restoration in China and Eastern Europe, and the defeats of the revolutionary rise of the 1960s and 1970s.

The great world recession of 2007-2009 marks the beginning of the downward phase of that long wave, which was the most serious crisis since the 1929 depression. From there on, nothing has been the same in the capitalist economy.

That is the basis of world reality before the pandemic, which was already leading established and emerging regions of the world to economic decline, and the growth of mass misery. Inter-bourgeois crises were aggravated by the Brexit, the U.S.-China trade war, etc.

The coronavirus pandemic is therefore hitting a downward wave of the world economy, which would be a critical situation.

But, within that long downward curve, where were we in the short cycle of the world economy, before the pandemic?

We were already on the verge of a new global recession. Europe’s economy was already in clear decline. With the stagnation of Germany – its pace car, with 0% growth in the last quarter of 2019 – all of Europe was coming down. Japan was starting a recession process. The so-called emerging countries, such as Russia, Brazil, Turkey, Mexico, Argentina and South Africa, were already experiencing anemic growth or were already in recession. China already had the lowest growth rate (6%) in recent years. And the United States, which was still growing, was already experiencing a drop in industrial production at the beginning of this year.

A new global recession has begun, perhaps worse than that of 2007-2009

That was the reality at the beginning of the year, signaling the proximity of a new global recession. The impact of the pandemic was brutal. Both because of the severity of the pandemic, and because of the fragility of the economy.

A new global recession began. At this point, it is not possible to clearly foresee the dimensions of the catastrophe that is developing. Neither for the pandemic nor the economic crisis. We can only present several hypotheses about its evolution.

The pandemic will cause heavy losses in human lives, which may vary from hundreds of thousands, to the millions similar to Spain’s 1918 influenza epidemic.

The global recession may be similar to or worse than that of 2007-2009, and even evolve towards a depression as in 1929.

Governments want to save companies… and avoid new revolutionary processes

In its last meeting, the G-20 defined a five billion dollar injection to face the consequences of the pandemic and the economic crisis. This is a gigantic plan, the largest in history.

Suddenly, the imperialist governments abandoned their neoliberal plans and adopted strong Keynesian plans to save big business and prevent new revolutionary processes.

Many governments took a “we are in this together” approach with these plans. Many gained popularity, including Trump, Macron, Fernandez (Argentina), and many others. Few assumed the provocative stance of Bolsonaro. They all are lying.

The plans allocate billions of dollars, unprecedented in history, to prevent the bankruptcy of big business. And incorporate a series of small concessions for the workers, to mask the essence of the bosses’ plans. They want to avoid the social upheavals that may occur as a result of the crisis.

The United States announced a $2 billion plan with much of the money going to big business. Only a minor part, of 500 million, will be destined to pay 1,200 dollars a month to each low-income family that is unemployed for three months.

Germany defined a 1.1 brillion euro plan (one third of GDP), with 600 million to save businesses and only 50 million to help the unemployed.

The IMF promises new loans for semi-colonial countries, which will again increase their foreign debt.

The “concessions” to workers will not reverse the impending misery. They are much lower than those needed to support families. Moreover, they are only temporary, from one to three months. Mass unemployment of workers will not be reversed. The deaths of millions will be mourned mainly by poor families.

These plans serve to deceive the people with a climate of “national unity” that is completely false. In a short time, these new farces will be in crisis.

In the same way, “social isolation” is a farce, because it keeps the workers at work. It condemns the informal workers to misery. The poor who do not have proper homes will continue to be condemned to contagion, with no defenses.

Many of these governments will manage to deceive for some time. But in reality, they are committing genocide against workers.

The same response for a much bigger crisis

Governments are repeating, to some extent, what they did to stop the 2007-2009 crisis. What changes is the size of the plans, not their nature. They are giving away even more state money to banks, big industries, etc.

The packages affect about 9-10% of imperialist countries’ GDPs, while in 2008 they affected 2%. This is a massive sum, unprecedented in history. If it were applied in the interests of protecting the workers, it would have different consequences, with the survival of millions of people.

With that, they managed to avoid a much bigger bankruptcy of the companies, and avoided the road towards a depression in 2008. They may achieve the same thing now, but we don’t think they can avoid the recession that has already begun.

The big companies appropriated this capital in 2008 and did not reinvest it in production. In the end, they are guided by the rate of profit, and didn’t find productive investment attractive. That is why they diverted a large part of that capital to encourage even greater levels of financial speculation.

The result is that old capital was thus expanded in the economy, artificially maintaining companies in crisis. The financial bubbles, which were already huge in 2007-2009, expanded even further. Global debt rose from $177 billion in 2008 to $247 billion dollars. Now it will be even higher.

These financial bubbles are part of fictitious capital. They do not produce value, which is only generated by factory production. They serve one sector of the bourgeoisie, to dispute the capital gains generated by another. At a time of economic upswing, they promote one sector or another artificially. At a time of decline, as is happening now, the bubbles begin to collapse, with a gigantic flight of capital around the world, aggravating the economic crisis.

Reissuing stimulus packages to companies can, once again, save the banks and one or another sector of the economy, it can also avoid the path towards a depression. But it will not prevent the recession that is beginning.

What determines an economic recovery is an increase in private investment by the bourgeoisie, which does not exist today and does not seem to be on the horizon. According to Michael Roberts: “In most capitalist economies, public sector investment is close to 3 percent of GDP, while capitalist sector investment is 15 percent”.

If the bourgeoisie decides not to invest, there will be no economic recovery. Big business will probably not invest with any weight until the rate of profit is attractive. Worse yet, in a world stopped by the pandemic and shaken by social and political upheavals. Nothing to do with the stability the bourgeoisie needs for its investments.

All that capital that will be transferred to big business is not going to generate any New Deal now, nor a wave of investment in production. It will be used once again, to put out the fire, to save big business from bankruptcy.

Moreover, unlike 2007-2009 when China was a factor in the re-stabilization of the economy, it is now part of the crisis.

The global recession has already begun. We will see if the world bourgeoisie manages to prevent it from being as bad as or even worse than that of 2007-2009. It may be that we are heading for a depression like that of 1929.

Similar to a war

The social effects of the pandemic, associated with unemployment and falling wages, determined by the economic crisis will be brutal.

The consequences may be similar to a war.

In world wars, the physical destruction in the countries directly involved was terrible. Human losses were gigantic, particularly in WWII. But this time, although the physical destruction of the means of production is unlikely, the loss of human life and resources may be of a similar dimension.

A gigantic destruction of productive forces can occur, starting with the main one: the human labor force, with the death of millions of workers, and the condemnation of hundreds of millions to even greater misery than at present.

Are we heading to new revolutionary processes?

What will be the political effects of the combination of the pandemic and the global economic recession?

First of all, bourgeoisie divisions are deepening both globally and within individual countries.

Before the pandemic and the opening of the economic crisis, there was already a situation of growing polarization and political instability in the world. This caused various revolutionary processes in Chile, Ecuador, Iraq, Hong Kong, and other countries.

Now, the situation of the workers will worsen qualitatively. In a few weeks and months, the pandemic and unemployment will reach the peripheries of big cities around the world.

There is no mechanical relationship between crises and increased struggles. Sometimes the fear of unemployment hinders mobilizations. But that does not seem to be the case this time.

Workers’ and youth political radicalization will increase substantially. Governments’ and regimes’ crisis will grow. Will this be transformed into new great upsurges of the working masses?

In this sense too, the scenarios have to be kept open because of multiple variables at play. But, because of the initial evolution, with the workers’ strikes in Italy, the cacerolazos (pan banging protests) in Brazil, Colombia and the Spanish state, it seems to us that the hypothesis of new revolutionary processes opening up is more probable.

In the case of the revolutionary process in Chile, the arrival of the coronavirus pandemic meant that mass mobilizations with street confrontations against the police had to be interrupted, due to the danger of contamination. The process continues, now focused on self-organization in the neighborhoods, and with a deepened radicalization of the movement due to the criminal policy of the Piñera government, in relation to the pandemic. Most likely, when the harshest effects of the pandemic pass, the revolution will resume the process with force.

The polarization between revolution and counter-revolution is going to increase greatly around the world.

Socialism or Barbarism

Capitalism is a system that privileges an absolute minority of humanity: the bourgeoisie and the upper middle class. It condemns to misery the absolute majority of the population: the workers.

In order to stay in power, the bourgeoisie governments present themselves as “representing all”. The ideology of “national unity” to deal with the pandemic is just a new version of that farce.

But, at some points in history, in a few countries, the real face of this brutal system appears. We are entering one of those rare moments of humanity. Now with a worldwide catastrophe and genocide.

In a few weeks or months, in much of the world, with the pandemic at its peak and the global recession beginning, we are going to have elements of barbarism in poor neighborhoods all over the planet.

There will be moments of rapid and convulsive change in the consciousness of workers around the world as well. It is important to confront this very serious situation with an anti-capitalist program, which a socialist perspective.

There is no real alternative for change within capitalism. The current governments, with their same old plans, are not going to avoid the crisis. On the contrary, it is likely that the genocides they are committing will be clear in many countries.

Bourgeois oppositions, even the most “leftist” ones like Sanders, propose partial measures, with the extension of public health for all. But they advocate that workers continue to work. They do not point to any real change in the economy.

Reformist sectors of social democracy, PT, PSOL, Podemos, etc., from all over the world, also point to partial measures within capitalism. They do not divert from Keynesian plans, of public investments to save the economy.

Others are under the illusion that this crisis can bring down capitalism, without revolutionary intervention by the masses to bring it down.

Capitalism may indeed emerge from this crisis, after some time, but it will emerge in an even more brutal form. It will incorporate harsher forms of dictatorship to maintain more savage exploitation. It will take advantage of mass unemployment to impose even lower wages. It will use the advances in repression and control during the pandemic to impose more authoritarian governments and regimes.

There are no other alternatives: socialism or barbarism. Capitalism must be struck head-on, not attempt to save it, once again.

We advocate that all workers should have the right to quarantine for the duration of the pandemic. And that informal workers have a guaranteed average wage for the whole period of the pandemic and economic crisis.

Everyone must have the right to quarantine in dignified conditions. For that to happen, the necessary hotels and housing units must be occupied.

We defend free, quality public health for all workers. This means the expropriation of hospitals and private clinics to put them at the service of all workers.

We defend the nationalization of large essential companies, starting with those that produce food and medicines, under the control of the workers.

In order to get out of world recession, we defend that the economy be planned, with the nationalization of its key sectors. It cannot be that humanity continues to be subjected to the interests of a tiny minority.

With today’s technological advances, a world without hunger and misery is possible. It is possible to have planned production that does not destroy nature. It is possible to avoid new pandemics, if the pharmaceutical industry were to engage in research to create vaccines and remedies to prevent them. It is possible to prevent economic crises.

But none of that is possible within capitalism. It is time once again to raise the red flags of socialism. And to join in the construction of revolutionary parties that defend those flags.

International Courier – 19

We are a Leninist international that defends a revolutionary and socialist programme. Parties in different countries are part of our International, also on the base of a workers' socialist programme. Our strategic project is to reconstruct the Fourth International founded by Leon Trotsky in 1938, because we consider it an indispensable tool to struggle for a worldwide socialist revolution.